How Can Whelan V. Jaslow and Lotus V. Borland Both Be Right? Re-Examining the Economics of Computer Software Reuse

Abstract

The basic economic goal of copyright law is to balance an author's incentive to create with his or her ability to build on prior work in order to maximize social wealth. This balance is extremely important for computer software. On the one hand, software is often expensive to create and companies therefore need protection in order to recoup their investment. On the other hand, software is often expensive to create and companies can save costs by reusing pre-existing work. Quite often, the same companies that want to protect their software also want to use pre-existing work.

As a result of the competing costs and benefits of copyright protection and the general complexity of computer software, the state of copyright law with respect to computer software has been in flux since the early 1980's and is still not settled. It appears that federal courts have been able to determine efficient economic outcomes based on the cases before them, but they have been unable to settle on a rule that definitively determines how much reuse to allow in each case.

How should a court go about deciding when reuse should and should not be allowed? While case law and traditional economic analysis provide general solutions, they do not guide courts in specific cases. This paper analyzes the problem that courts face in computer software copyright cases, presents an economic model that describes this problem, and presents a set of economic based factors that can be used by courts to obtain efficient solutions in each case.